韵达股份(002120)

Company Profile

Yunda Holding Co Ltd operates as a holding company. The Company, through its subsidiaries, providesindustrial investment, enterprise management, business consulting, car rental, technicaldevelopment, information technology, and advertising services. Yunda Holding serves customers inChina. (Source: Bloomberg)

Events

Yunda (the company) released financial reports for FY18 and Q119. For 2018, its operating incomejumped 38.76% YoY to CNY 13.86 bn; its net profit attributable to shareholders surged by 69.76% YoYto CNY 2.70 bn; its net profit attributable to shareholders without non-recurring items was CNY 2.14bn, implying a 23.1% YoY increase.

For Q119, its operating income was CNY 6.69 bn (+151.60% YoY); its net profit attributable toshareholders was CNY 567 mn (+40.38% YoY); its net profit attributable to shareholders without nonrecurringitems was CNY 500 mn (+38.08% YoY).

Comments

Yunda maintained a higher-than-industry-average growth rate for the reporting period.

The business vol. growth was 55.15%/49.87%/45.40%/47.15% for the four quarters in 2018respectively, all above the industry’s average. Company’s market share of express delivery hadreached 13.77% for 2018, 2 pcts higher than 2017’s. The company has maintained better-thanaverageperformance since 2016, thanks to its strong control over shipping vehicle, transfer, andtransportation network that enabled by scientific route planning, which has also led to continuousimprovement in service quality: Yunda ranked the third in the overall effectiveness according to StatePost Bureau, only second to SF Express and EMS; the average monthly effective complaint rate was0.77, second only to SF Express, far below the industry average of 2.24. High service quality furtherpromotes the high growth of business vol. to produce a larger scale effect. The high service qualityand cost advantages brought by decent management capability lead to company’s high growth.

Yunda keeps high proficiency in cost management and its cost per order continues decreasing.

In 2018, the proportion of drop-and-pull vehicles increased 6.1 pcts; the proportion of self-operatedfranchisers increased 2.41 pcts; weights per order decreased by 12.94%; overall sorting capacityincreased by 51%; the number of employees decreased by 6.67%; and general-efficiency per capitaincreased by 18.84%. The service cost per order was CNY 1.22 (-11.60% YoY). The transit cost perorder was CNY 1.21 (-10.7% YoY), and the transport cost per order was CNY 0.83 (-11.2% YoY).

The profit appeared high growth during the peak season in Q418 and the earnings from Hive Boxequities were mainly contributed by extraordinary gains.

The company had excellent control over temporary costs, with a price raising, breaking “no profit”situations caused by excessive investment in temporary costs during the previous peak season. Thenet profit attributable to shareholders without non-recurring items for Q418 jumped 80.1% YoY toCNY 0.73 bn. Besides, the company sold 13.5% of Hive Box as recognized revenue, resulting in a netinvestment income of CNY 0.65 bn in Q318. In terms of SG&A, the growth rate of management feesand sales fees was less than that of the volume growth, while financial fees continued to be negative(interest income increased substantially), and SG&A per order continued to decrease. The grossmargin of express business was about CNY -60 mn in 2018.

Yunda kept high profitability under intense competition.

The competition in express delivery industry had an intensifying trend during Q119, yet thecompany’s operating performance was still impressive. Yunda’s business growth was 40.58% andrevenue growth of express delivery business was 156.32% (mainly due to the delivery charges startedto be accounted for revenue. Competitors have more stable earnings per order (comparable caliber).The net profit attributable to shareholders without non-recurring items grew 38.08% in Q119. Thecompany’s scale effect and superior management continued to transfer to operational performance,while the advantages of Yunda's service quality support its higher service charging than otherindustry peers’.

Earnings forecast and investment recommendation

Although there is a trend of intensifying competition in express delivery industry this year, we hold apositive outlook for the company’s upward cyclical development guided by its low-cost strategy.

Yunda sharpens its competitive edges in cost-control, effective management culture, and decentservice quality. It is expected that the company’s business vol. will continue robust growth with asteadily increasing market share. The company may still follow the positive circular development of“high-quality service �C rapid business vol. development �C scale effect/cost reduction of science andtechnology input �C more market shares”.We revise company’s estimated net profit for 2019/2020/2021 to CNY 2.94/3.75/4.74 bn respectively,implying an EPS of 1.72/2.19/2.77 and a P/E ratio of 21.9/17.2/13.6 (calculated at the closing price onApril 26th, 2019). We maintain “Outperform” rating for the company.

Potential risks: online retail growth may decline; capital expenditures and labor costs may exceedexpectation; price war may exceed expectation.